Ongoing Drought Pushes Beef Prices to Record Levels

As Texas, the nation's biggest beef-producing state, enters its fourth year of drought, beef prices have reached their highest level in almost three decades, according to the Texas Beef Council.

Economic and agriculture experts are concerned that as drought conditions continue nationally and in Texas, increasing food prices could take a toll on ranchers, grocers and consumers. While some ranchers are enjoying the bigger bottom lines of the increased prices, others worry the increased prices could mean a drop in sales.

The average retail price of fresh beef prices climbed to $5.28 a pound, up by 5.4 percent from this time last year, according to the Texas Beef Council.

“At this point, the biggest impact of the drought has been on beef prices,” said Bryan Black, spokesman for the Texas Department of Agriculture. “The drought that began in the fall of 2010 forced cattle raisers in Texas, Oklahoma and elsewhere to reduce the size of their herds. As a result, beef production has declined, and that has pushed prices higher.”

Texas farmers and ranchers produced 15 percent of the country’s beef and processed 19 percent of the U.S. total in 2012, according to the Texas Department of Agriculture.

Wade Ross, a rancher and state coordinator of the Texas Small Farmers and Ranchers Community Based Organization, said the lack of water had made it challenging to grow food for cattle. And that left ranchers with no choice but to cut back on their herds.

About seven years ago, Ross said, he used to sell 25 head of cattle a year. Now, he’s selling eight a year. Ross said it would take ranchers almost 12 years to get back to where they were before the drought.

“With diminished supply, the farmers and ranchers have been suffering through the consequence of the drought for five to six years, and it is only starting to affect the public,” Ross said.

Donnell Brown, the owner of R.A. Brown Ranch, said he has had to reduce his 1,000-cow herd by 50 percent over the last three years.

“Last year, 70 percent of our ranch was unusable because we were out of water,” Brown said.

But Tracy Tomascik, a cattle farmer and an associate director of the commodity and regulatory activities division at the Texas Farm Bureau, said the increased price of cattle and continued demand for beef has meant a bigger bottom line. Tomascik said that on average, a calf that sold for $500 three years ago now goes for $750.

“Our cattle prices are at record-high levels, and I am very happy to be selling,” Tomascik said. “The market has done a wonderful job of compensating for the lower supply of cattle by adjusting to higher prices.”

And with fewer cattle being raised, Tomascik said, the grassland can be restored and can recover from damage caused by the long drought.

Brown said that even though the increased prices are helping his business stay afloat, he would prefer that his product was more affordable to customers.

For retailers, the higher meat prices mean less profit.

“These have been the hardest and most unprofitable years in terms of protein prices,“ said Scott Nettles, meat and seafood director for the United Supermarkets grocery chain. “The low-percentage profits are driving up our fixed costs such as labor, electricity bills, rent, etc.”

Nettles said a brisket that was $1.65 per pound three years ago is now $3.25 per pound. While beef demand is still high, he said, the growing prices have made chicken and pork more popular.

A number of factors drive food prices, said Andrew Harig, the director of government relations for the Food Marketing Institute.

In addition to the drought in Texas, Harig said, low rainfall in Brazil is driving up the prices of coffee, soybeans and sugar. Orange juice prices are shooting up due to “citrus greening” that is decreasing harvests in Florida. And a virus called porcine epidemic diarrhea has spread across 22 states, hurting pig herds and driving up the price of some pork.

National Drought Mitigation Center climatologist Mark Svoboda said that with two-thirds of Texas being more than three years into drought, the impact on food production will ramp up if Texas doesn’t receive enough precipitation in May and June.

Disclosure: The Texas Farm Bureau is a corporate sponsor of The Texas Tribune. A complete list of Texas Tribune donors and sponsors can be viewed here.